Q&A: Oil eventually will lose its place as leading auto fuel

By Collin EatonHouston Chronicle

Published 5:59 am, Monday, December 1, 2014

One day, crude oil will lose its grip on cars and trains and ships, but with costs to produce alternative energy still high, a change that big will likely take many decades. How long is anyone’s guess, says one man with a head start on most prognosticators.

Henrik Madsen, the CEO of Norway’s international shipping and oil field equipment classifier DNV GL, says the commercial automobile market is the last bastion of crude oil, after its disappearance from power plants and heating fuels in the second half of the 20th century. Its days in vehicles and vessels are numbered.

LNG’s advance in vehicles is likely good news for those counting on the earth’s resources in coming decades, Madsen says. Oil, he added, is too precious to burn in a combustion engine, and should be reserved as a feedstock for ingredients to make high-end products including clothing, plastics, coatings and pharmaceuticals.

The emergence of alternative energy sources in transportation isn’t great news for oil-producing nations like Saudi Arabia whose economies are linked to crude-pumping wells, he said.

“They might be a little bit afraid of shale oil, but I think they’re more afraid of the use of oil in transportation disappearing,” Madsen said.

DVN GL has an office and oil and gas operations in Katy. Madsen, recently in Houston, spoke with the Chronicle about the pivot to LNG and compressed natural gas fuels in trucking, and the early signs that point to a future of lower oil consumption. Edited excerpts follow:

HC: You describe the “energy trilemma” as the balance between protecting the environment while retaining affordable energy costs and ensuring we have enough energy. Where is that effort today?

Madsen: I think everybody agrees we need many energy sources in the future. We need oil, gas, coal, wind, solar, geothermal. One of the things we’re focused on is how we use the different forms of energy. We think there will be a transformation in that oil will lose its position in transportation. On the trucking side in the U.S., that transformation is happening fast, because the price of LNG is 10, 20 percent of the price of diesel. You’ve seen some train companies consider using gas instead of diesel, you’ve seen it in the oil field service sector, where they’re using gas to drill for shale oil.

HC: Expand on what’s driving this.

Madsen: In terms of emissions, you will reduce local pollution a lot. But primarily it is because gas is much cheaper. From a technical point of view, this major change would not be impossible, say over a 20- to 30-year period. But at the same time, it will be as the cost of transportation fuels goes up, so how slow the transformation will be is anybody’s guess.

HC: Do you envision less oil exploration in the future?

Madsen: That may be 30 or 40 years from now. I think consumption will be lower then. But people don’t talk much about that. They’re talking about how we’re at peak oil and how we can find more oil and so on, instead of looking at what it’s used for. I personally think it would be nice to reserve oil for high-value products.

HC: What are the safety concerns related to using LNG as a transportation fuel?

Madsen: It’s very cold, so if you spill it on a ship, the steel will crack. LNG can burn but it doesn’t explode, so LNG is remarkably safe. They’ve been transporting LNG around the world in tankers for 40 years and there have not been any fatalities.

HC: Are renewable energy sources growing fast enough?

Madsen: Many people talk the growth down, but at least in Europe there’s still a high growth in renewables, and there’s also high growth in the U.S. I think the International Energy Agency constantly underestimates the growth. If you look at solar now, prices are coming down much faster than we thought, and it’s actually competitive for local production. Onshore wind costs are coming down and we’re trying to drive offshore wind costs down.

Now Playing:

HC: Is wind held back by its reliance on subsidies?

Madsen: They don’t need subsidies. The more they talk about subsidies, the more everybody thinks they’ll need subsidies forever and that it’s not a long-term solution, which is actually wrong.